Trading Outpost

Why Your Breakouts Keep Failing, and What to Check

Every figure and named finding stated in this video, traced to a primary source.

Why an obvious level collects orders

The central claim of the video is that a price level everybody can see accumulates resting orders on both sides of it, and that those orders are what price is sometimes reaching for. This is documented rather than folklore.

Carol Osler, working at the Federal Reserve Bank of New York, obtained the complete stop loss and take profit order book of a large foreign exchange dealing bank. The data covered 9,655 orders with an aggregate value in excess of $55 billion across three currency pairs, dollar yen, dollar UK pound and euro dollar, placed between 1 August 1999 and 11 April 2000. Twenty eight percent were executed and 71.6 percent of orders were open for less than one day.

The two findings the video rests on:

  1. Currency stop loss and take profit orders cluster strongly at round numbers, with $1.4300 per pound and ¥123.50 per dollar given as examples in the paper.
  2. The clustering is asymmetric, and the asymmetry is the mechanism. Stop loss buy orders cluster at rates just above round numbers, and stop loss sell orders cluster just below them. Take profit orders show no such asymmetry, and cluster more strongly at round numbers ending in 00 than stop loss orders do.

The paper draws the same two conclusions the video does. Order clusters sitting at a round number tend to be dominated by take profit orders, which is why price so often turns there. Clusters sitting just beyond a round number tend to be dominated by stop loss orders, and those propagate a move rather than absorbing it.

Source: C. L. Osler, “Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis”, Federal Reserve Bank of New York, May 2002. Published as Osler, Journal of Finance 58(5), 2003. https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr125.pdf

Why the move through a level can be fast, and then fail

A companion paper tests what actually happens to price when it reaches those clusters, using minute by minute quotes for dollar mark, dollar yen and dollar UK pound during New York trading hours from January 1996 to April 1998.

Its findings, in the order the video uses them:

  1. Exchange rates move unusually rapidly once they reach levels where stop loss orders cluster.
  2. The reaction to reaching stop loss orders is larger than the reaction to reaching take profit orders, and it lasts longer. Most results are statistically significant for hours.
  3. Stop loss orders propagate trends and are sometimes triggered in waves, which the paper calls a price cascade.

The paper also records that market participants have their own name for this, “running the stops”, and describes the resulting moves as gappy, meaning individual price levels are skipped as the rate travels from one level to the next.

The paper quotes a Deutsche Bank account of dollar yen on 7 March 2002 as a worked example: the first wave of stop loss selling came on the break of ¥130.50, then again on the break of ¥130, and once below ¥129.80 the rate fell within seconds to ¥129.40. The same paper notes that a currency market newsletter reported stops being triggered on at least 16 of approximately 190 trading days between December 2000 and August 2001.

Source: C. L. Osler, “Stop-Loss Orders and Price Cascades in Currency Markets”, Federal Reserve Bank of New York Staff Report No. 150, April 2002. Published in Journal of International Money and Finance 24(2), 2005. https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr150.pdf

Sessions, and why a thin market is different

The video says that a breakout during an active liquid session is a different thing from a breakout in thin conditions, and names the Asian, London and New York sessions.

The order book study above measured when price contingent orders were actually placed and executed. Order placement for dollar yen peaked during the Asian afternoon and London morning, while placement for dollar pound and euro dollar peaked during the London afternoon and New York morning. The number of open orders peaked at about 10am New York time, when there were on average 159 open orders in total, and order execution peaked at around the same time. Most price contingent orders were executed during the roughly ten hour interval running from the Asian afternoon through the London afternoon and New York morning.

Source: as above, Osler, Federal Reserve Bank of New York, May 2002, section B, Data.

The scale of the market these levels sit in

Global foreign exchange turnover averaged $9.6 trillion per day in April 2025, up 28 percent from $7.5 trillion three years earlier. On a net gross basis the United Kingdom accounted for about 38 percent of that, at $3.6 trillion per day, and the United States about 19 percent at $1.8 trillion, with Singapore at 11.8 percent and Hong Kong SAR at 7.0 percent. Those four jurisdictions together carried 75 percent of global trading. FX swaps were the most traded instrument at $4 trillion per day, with spot second at $3 trillion.

Source: Bank for International Settlements, “OTC foreign exchange turnover in April 2025”, Triennial Central Bank Survey, published 30 September 2025. https://www.bis.org/statistics/rpfx25_fx.htm

A figure this video deliberately does not state

A widely repeated summary of the Osler order book study claims that stop loss orders were 43 percent of all orders by volume and 45 percent by value. The primary text does not say this. What it says is that of the 9,655 orders, 43 percent were in dollar yen, 33 percent in euro dollar and 24 percent in dollar UK pound. That is a breakdown by currency pair, not by order type, and the video states no figure for the share of orders that are stop losses.

The price examples

The charts in this video are illustrative. They are built to show the mechanism being described rather than to reproduce any particular historical window, and the prices, levels and pip figures on them are constructed for that purpose. The only real market prices stated anywhere are the dollar yen levels from 7 March 2002 quoted above, which come from the Federal Reserve Bank of New York paper.

Not established here

Several ideas in this video are widely used by traders and are presented as practice rather than as findings. No primary evidence is offered for them and none should be inferred:

  1. That expanding volume on a breakout reliably distinguishes a real break from a failed one, in any given market.
  2. That a breakout out of a volatility compression continues more often than a breakout after price is already extended.
  3. That comparing a stock against its sector or the wider market improves the odds on a breakout in that stock.
  4. That breakouts around scheduled news behave differently enough from ordinary technical breaks to require a separate approach.
  5. That waiting for a candle close, or for a retest, improves results on balance. The video presents this as a trade off with a cost, which is how it is treated here.